Organizing for innovation is an important determinant of competitive success, and firms are increasingly turning to external sources as an alternative to internal means, including of late offshore outsourcing. Extant research on offshore outsourcing has largely studied non-core, fairly routinized tasks, such as IT services and BPO. However, companies have recently begun outsourcing higher-end work entailing greater complexity and uncertainty, including knowledge-based services like new product development. We hence investigate to what extent the offshore outsourcing approach can effectively transfer to such projects, by developing a simulation model based on field research of a sample of global software development projects conducted by a leading Indian outsourcing vendor with its customers. We contrast the more virtual global delivery model with a more traditional so-called consulting model and find that an offshore outsourcing approach based on distinct strategic complementarities can handle sophisticated higher-end work, by adopting a suitable team structure and capability composition. The results bear implications for traditional notions of firm boundaries and organizational forms.